CFPB and New York Attorney General File Lawsuit Against Illegal Nationwide Debt Collection Scheme

Washington, D.C. – Today the
Consumer Financial Protection Bureau (CFPB), in partnership with the New York
Attorney General, filed a lawsuit in a federal district court against the
leaders of a massive debt collection scheme based out of Buffalo, N.Y. The
lawsuit alleges Douglas MacKinnon and Mark Gray operate a network of companies
that harass, threaten, and deceive millions of consumers across the nation into
paying inflated debts or amounts they may not owe. The Bureau is seeking to
shut down this illegal operation and to obtain compensation for victims and a
civil penalty against the companies and partners.

“Our lawsuit asserts that millions of
consumers were harassed, threatened, and deceived as part of a massive scheme
to collect inflated debts,” said CFPB Director Richard Cordray. “Today we are
taking action against the ringleaders of this operation so they can no longer
prey upon vulnerable consumers. We are pleased to be working in partnership
with New York Attorney General Schneiderman to hold these companies accountable.”

“Living with debt is difficult enough as it is, without the added stress of
being harassed and threatened by debt collectors,” Attorney General
Schneiderman said. “These collection shops inflated debts of their
victims. This suit sends the message that debt collectors that employ abusive
tactics will be held accountable.”

The CFPB and the
New York Attorney General allege that Northern Resolution Group LLC, Enhanced
Acquisitions LLC, and Delray Capital LLC are interrelated collections companies
based in Buffalo, N.Y. Together, the companies have purchased millions of
dollars’ worth of consumer debt and collected some of those debts
directly. The companies were created, operated, and are overseen by
Douglas MacKinnon and Mark Gray.

The complaint
alleges that since at least 2009, Northern Resolution Group, Enhanced
Acquisitions, and Delray Capital, operating under the supervision of MacKinnon
and Gray, have served as the lynchpin of a massive collections scheme. The
operation routinely inflates consumer debts and relies on illegal tactics to
extract as much money as possible from consumers for debts. MacKinnon also set
up a network of at least 60 additional fly-by-night debt-collection firms to
collect on the large debt portfolios purchased by Northern Resolution Group,
Enhanced Acquisitions, and Delray Capital. This elaborate network also served
as “window dressing,” or a workaround, when other debt sellers would no longer
do business with the defendants.

The CFPB alleges
that the defendants violated the Fair Debt Collection Practices Act. The CFPB
and the New York Attorney General also allege that the defendants violated the
Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits
unfair and deceptive acts or practices in the consumer financial marketplace.
Specifically, the CFPB and the New York Attorney General allege that MacKinnon,
Gray, and their network of debt collection companies:

Inflated consumer debts and misrepresented amounts
consumers owed: The defendants misrepresented to consumers that
they owed sums they did not owe, were not obligated to pay, or that the
companies did not have a legal right to collect. Specifically, Northern
Resolution Group, Enhanced Acquisitions, and Delray Capital illegally added
$200 to each consumer debt account they acquired, regardless of whether
applicable state law or the underlying contract between the consumer and the
original issuer permitted such fees or charges. In some cases, the scheme
further inflated the amounts owed by tacking on additional unauthorized fees
and charges to the debts. At times, some collectors quoted consumers
balances that exceeded 600 percent of the debt amount.

Falsely threatened legal action:
The
companies falsely threatened consumer with legal action that the collectors had
no intention of taking. In reality, they never referred a case for prosecution.
In some cases the companies falsely accused consumers of committing
crimes. Further, the companies lied to some consumers, claiming that they would
be arrested to pressure them to pay debts. In one case, the companies
instructed a consumer that she did not even have time to get a lawyer because
she would be arrested the next day. These deceptive practices could also have
affected the relative priority consumers gave to competing financial
commitments.

Impersonated law-enforcement officials, government
agencies, and court officers: The companies faked calls and emails to
make it appear the communications were coming from government or court
officials. The companies used call-spoofing technologies to make it appear that
collectors were calling from government agencies. The collection agents
would barrage consumers and relatives with calls, claiming to be a government
official who could arrest the consumer for non-payment of the debt. The
companies also used emails to pretend they were contacting consumers and their
family from a court.

The complaint also
alleges repeated fraudulent acts and deceptive acts or practices in violation
of New York law, as well as violations of New York state debt-collection law.

According to the
complaint, MacKinnon and Gray have known about, directed, and encouraged these
illegal collections practices and have profited significantly—amounting to tens
of millions of dollars annually. These illegal profits have been funneled back
to MacKinnon, his relatives, and Gray through payments to various sham
companies that MacKinnon, Gray, and MacKinnon’s relatives controlled.

Through this
lawsuit, the Bureau seeks to stop the alleged unlawful practices of MacKinnon,
Gray, Northern Resolution Group LLC, Enhanced Acquisitions LLC, and Delray
Capital LLC. The Bureau has also requested that the court impose
penalties on the company and its partners for their conduct and require that compensation
be paid to consumers who have been harmed. The CFPB’s complaint is not a finding or ruling
that the defendants have actually violated the law.

The
Consumer Financial Protection Bureau is a 21st century agency that helps
consumer finance markets work by making rules more effective, by consistently and
fairly enforcing those rules, and by empowering consumers to take more control
over their economic lives. For more information, visit consumerfinance.gov.